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HP Labs Director Prith Banerjee wants to be disruptive. When he was named to lead Hewlett-Packard’s (HPQ) research arm in 2007, Banerjee launched a reorganization that narrowed the labs’ focus to a short list of high-impact research topics, described as “Big Bets” that have the potential to create significant business opportunities for HP.

Banerjee, a former academic who’s started two companies of his own, says the results can be seen in HP Labs’ latest annual report, which cites 138 innovations the labs have handed over to the company’s business units for commercial use.

But in recent years, some have wondered if HP was losing its innovative edge, after former CEO Mark Hurd cut research and development spending from $3.6 billion in 2006 to $2.8 billion in 2009. Most of that goes to HP business divisions for product development; in 2009, HP said the labs had a $150 million budget and 500 researchers at seven sites around the world.

Banerjee won’t disclose his budget or staff today, but he said his funding grew when Hurd’s successor, Léo Apotheker, raised R&D spending to $3.3 billion in 2011. Current CEO Meg Whitman has promised further increases; she’s also re-ordered the chain of command so Banerjee reports directly to her. In this interview, edited for clarity and length, Banerjee discussed those changes and some of the labs’ recent work.

Q: Your new annual report says HP Labs had 138 “technology transfers” in 2011, or innovations that HP business units are now considering for commercial products. Are you trying to increase that each year?

A: The goal is not to increase the number but the quality. There is evolutionary innovation, which is creating the next version of an existing product. And that’s important. But what I’m after is really big, disruptive innovation.

One example from last year was the Vayu Internet Device (a set-top box that lets people reach the Internet on a television set, developed by HP Labs in India). This is a really innovative thing for the Indian market, where there are a billion people and only 5 percent have access to the Internet, but many more have TVs in their home.

This kind of idea you would not think of while sitting in Palo Alto. This is why we have a lab in Bangalore. These are the kind of opportunities we want to create for HP’s business units. They have established products; we come out with this wacky device. It’s a new opportunity that they are evaluating as we speak.

Q: How do you decide to launch new projects?

A: In the past, you might have one or two researchers work on something and if it doesn’t work out, it’s no big deal. We are now doing larger efforts, putting 20 to 25 people on a project for four or five years. That’s $25 million worth of investment, the kind of investment you might put in a start-up.

VCs don’t fund a new startup without a formal review. So we’ve created an advisory board, with representatives from HP business units, technology experts and people from the labs. This group looks at all the projects, like managing partners in a VC firm, and they assist me in picking the ones we’ll do. Then these projects get reviewed every year so we can see if they are still relevant.

An example of a project that started four years ago is the “next generation data center.” (It led to last fall’s announcement of a commercial effort called “Moonshot,” in which HP is building computer servers using low-power processors like those in smartphones.) Moonshot is step one of a larger vision for addressing complex, data-centric analytics workloads: We are also working in the labs on memristors (a new form of fast, low-power electronic memory) and photonic interconnects (which transmit data on a beam of light, instead of a cable). We’re not done yet.

Q: What’s a new project that you’ve launched in the last year?

A: We have several. One involves cognitive computing, a project we call “Cog ex Machina.” That came out of work we are doing with Shell Oil, where we have a tremendous amount of data coming from thousands of sensors in an oil field. Today, human beings look at that data (and interpret it). This project will develop intelligent analytics; it’s not quite artificial intelligence but it has similar goals.

Q: Do you think you’ve missed any good ideas by focusing on a small number of “Big Bets,” instead of a larger number of projects?

A: No. We allow people to use 20 percent of their time to look at new areas. In addition, we have seven labs and the director of each lab has 20 percent of the staff working on completely wacky things that I don’t know about. At the end of the year, I ask each director, “What happened in your ‘Big Bet’ projects?” And then, “Surprise me! What else have you done?” The Cog ex Machina project came out of this.

Q: How often do you hire new researchers? And what do you tell a young Ph.D. who’s trying to decide whether to stay in academia, join a startup or work for a big company like HP?

A: We recruit all the time. Last year we opened up 20 positions, and this month we opened another 20. These people have offers from other places. But they come here because the breadth of things that HP does is so awesome — we have printing, personal systems, servers, storage, software and services — and because of the expertise we have in the labs.

The world’s expert in sensors is at HP Labs, for example. The biggest guy in signal processing is here.

Q: Have you changed your pay scale to compete with startups, which might offer the potential of millions in stock options?

A: We offer not just salary; there are also bonus and equity components, with stock that vests over multiple years.

I will tell you the compensation we provide will not be like those millions that some are making at Facebook. There is no way we can be competitive at that level, but we are definitely competitive with respect to comparable organizations like Microsoft or IBM.

Q: You joined HP during the Mark Hurd era. Critics say he cut research to increase short-term profits. How did that affect HP Labs?

A It is true that Mark was concerned about costs. He was great at identifying inefficiencies. But what I will tell you is that he and I shared a vision for doing big things. He asked me at one meeting, “Hey Prith, where’s my iPhone?” He wasn’t asking literally for an iPhone, but for big, disruptive innovations. And we responded to that challenge.

Since Mark left, Léo increased the R&D budget across the company and in the labs. And with Meg, now I directly report to her. We are getting added resources and the hiring that I talked about is happening because of that. And we have access to the CEO that we have not had in the past.

Contact Brandon Bailey at 408-920-5022.

Prith Banerjee

Title: Senior vice president and director, HP Labs

Age: 51

Career: Joined HP Labs in 2007 after serving as dean of engineering at the University of Illinois, Chicago; previously served as chairman of electrical and computer engineering at Northwestern University and professor of electrical and computer engineering at University of Illinois, Urbana-Champaign. Also started two companies, BINACHIP and AccelChip.

Education: Earned Ph.D. and master’s degree in electrical engineering from University of Illinois, Urbana-Champaign, bachelor’s degree in electronics and electrical engineering from Indian Institute of Technology in Kharagpur, India.

Other activities: Serves on the Computer Science Advisory Board of the National Academy of Engineering and the Technical Advisory Board of Cypress Semiconductor; also is a fellow of the American Association for Advancement of Science, Association for Computing Machinery and the Institute of Electrical and Electronics Engineers.

Family: Married with 22-year-old son

Residence: Palo Alto

Five thingsabout Prith Banerjee

1. He was born in Sudan and moved frequently as a child because his father worked for the Indian diplomatic corps.

2. An avid gadget-builder, he chose his career path in high school after winning a science award for his design of an electronic meter to measure water flow.

3. He started his first company, AccelChip, in 2000 because he was frustrated with trying to get private industry to put his academic research into practical use; he sold the company, which made products for automating chip design, to Xilinx in 2006.

4. He enjoys discussing information analytics with his son, who earned a computer science degree at UC Berkeley and now works for Zynga.

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